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use more gadgets at the start of a flight. hear which ones. i'm fredricka whitfield. i'll see you in the newsroom one hour from now. first, stocks and likely your entire savings take a tumble this week. much more on "your money" with christine romans. a potentially lame duck fed chief speaks and a bull market is stopped in its tracks. hello, everyone. i'm christine romans. this is "your money." in two days the dow lost 559 points. thursday's loss was the worst of 2013 so far. but at the start of the year, the dow was up more than 2,000 points. it wasn't just stocks. take a look, though, at gold. it tanked as well. now less than $1300 an ounce. it was above 1800 less than a year ago. oil prices dropped as well, plus bond yields surged and the u.s. dollar jumped. this was not just the stock market tanking. every market moving, every market responding to the fed
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chief. maggie lake is a business manager, richard quest also has his own show. the beginning of the year, the market up 2,000 points. this was a big excuse to take profits. >> absolutely it was. when you see those numbers, it feels so scary, but when i ask people, is this fundamental? is this is there wrong with the economy? so many people came back to me and says, it's hedge funds taken out, they want to lock them in, they're resetting, moving to cash, resetting, and it's going to be temporary. so it wasn't nearly as scary and it really was hedge funds, that fast, short-term money. not the long term, people. >> so ben bernanke didn't say we're taking money out of the economy, we're putting on the brake. he said sometime in the future, when the unemployment gets to 7%, we will slow down on the accelerator. >> it's exactly what people wanted them to do and it's exactly how they should do it. give them lots of time to adjust, lay out the framework,
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give them exact details. this is when we think we're going to do it, we're going to do it gradually. and if the economy weakens, we're going to get back in and make sure it's okay. >> ben bernanke says the fed will pull back stimulus measures as the economy improves. that is a good thing the fed chief is giving a road map for that. that means the u.s. economy can stand on its own. that means the u.s. economy is healing. but then you have nagging concerns about the rest of the world. a recession in europe, china's growth appears to be slowing. the global worries are one reason why stock investors are so concerned about a pull-back from the fed right now. >> this is a classic case of heads you win, tails i lose. it doesn't matter what bernanke would have said, the markets are ready to fall out of bed. it's per ververse, it's obscure it's childish, it's all those things. but here's the reason. because investors have gone for
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exotic emerging markets with very narrow exits. of course, when things start to change, they all head for the door at the same time. you're absolutely right. the mere fact that he will be taking his foot off the gas is because the car is going fast enough on its own. so you have to put it into context. do i think we should be concerned? the hiccup, bucolic plague of the last week. absolutely not. the market knew it was coming and they're just having a nasty bout of indigestioindigestion. >> what about china? factory output weaker than expected. last year china's growth was the weakest in 13 years. if the fed is pulling back the same time china is slowing, that could have repercussions for currencies, for metals, for demand around the world. >> careful. you've got that coin out again. heads you win, tails i lose. once again, china is going too fast. 8, 9%.
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the sky is falling in. inflation, it's a disaster. china is only growing at 7.5%, 6 to 7.5%. it's awful, it's terrible. which is it? the truth is china needs to slow down and moderate its growth, and that's exactly what we are seeing. but the market, the global markets live their life on the edge of a precipice fueled by sugar rushes of individual information, and that's why you get this volatility. and the difference from the past to now, as mikey was saying, it's hedge funds, it's trading. balancing this global economy in this new era ain't going to be easy. >> okay, the taper, mag zgie, t taper. this word that has become the new qe, the fiscal cliff, the horrible word that people throw around, the taper. if he does the taper, it means the u.s. economy is healthy.
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>> it should mean that, and that's why you hear that the market has had a taper tantrum. we're stuck with it for the moment. the one thing we're seeing is the deep emotional scars of what happened in the global financial crisis. ask that's what richard is touching on as well. we are on edge all the time, because even in china, they start to take a little excess out. it's a credit crunch. it's what happened before lehman. that was in the brokerage notes this week. we have to take a little emotion out, talk to people with a longer term perspective. they will tell you the economy is looking better. the fed can exit, and they're there in case we have a wobble. and the taper is not tightening, as ben bernanke tried to point out. they're not stepping on the brake, they're just taking their foot off the gas. >> there is an effective tightening, a minor tightening taking place, of course. this is where we have to distinguish between if you like the big picture which maggie was
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talking about where the economy is moving and we should be pleased. but there is a highly technical point, of course, that as accommodation or as tapering takes place, bond deals will rise. that requires investors to start thinking about where they're going to put the money. if bond deals are rising, mortgages will rise and collerns will rise. >> you want to take that excess out. there are bubbles forming and the fed wants to stop that. >> but that is a de facto tightening, and there you will see the specialists starting to scratch themselves and say something is going on. but the big picture, which is what you and i need to consequence on, the big picture is looking rosy. >> i'm not scratching anyone anywhere, richard quest. i'm just trying to keep my 401(k) properly balanced and make it to the next week. thank you both. next, a crunching
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government, stagnant wages, student debt. do you feel like you're living in america that parallels rome before the fall? i'm going to give you the facts. and then -- >> not only now do i have a card which makes me have the ability to buy in california, but because i have this form, which i am even more shocked by, now i have the ability to grow marijuana. >> cnn's inside man morgan spurlock joins me. ♪ if you have high cholesterol, here's some information that may be worth looking into. in a clinical trial versus lipitor, crestor got more high-risk patients' bad cholesterol to a goal of under 100. getting to goal is important, especially if you have high cholesterol
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i'm all about "free" travel, babe. that's what i do. [ female announcer ] fortunately, there's an easier way, with compare hundreds of cards from every major bank and find the one that's right for you. it's simple. one america but two different economies. if you have money, this economy is working for you. the housing market is hot enough, stocks have been soaring to all-time highs despite the market being rocked this week, and many companies are reporting solid profits. they're sitting on record piles of cash. but for many americans, it's a sluggish recovery that's prompting fears for a fundamental shift toward a bleaker economic future. let's start with jobs. it's true that hiring has picked
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up, but a third of americans now make $24,000 a year or less. our economy is only growing at a 2% annual rate, much lower than we need, and that's not even on its own. the federal reserve gets much of the credit there. as for paying the bills, every man, woman and child in america now owes more than $50,000 for their share of government debt. but don't look to your elected leaders for any serious, long-term solutions. the international monetary fund recently says the reckless for-spending cuts beginning of this year cut gdp growth 1.5 percentage points. which makes us wonder, is this rome before the fall? last time i checked, the roman empire is ancient history. how does this turn into this? historians tell us the romans, like many civilizations before and after, collapsed under the weight of too much debt. an overextended military,
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debilitating partisanship and fiscal responsibility drove the roman empire into the ground. does any of that sound familiar? the u.s. currently has $16 trillion in debt, up from less than a trillion in 1990. two expensive wars in the middle east and prolific spending to blunt an economic downturn. on top of what we already owe, there is another 20 to $50 trillion the government will need to fulfill its promises on social security and medicare as the baby boomers retire. and partial gridlock in washington has crushed any hope of progress. >> the republicans want to balance the budget. the president doesn't. >> while the bulk of this deficit was being amassed, i didn't hear them say boo. >> reporter: just like the senate of the roman empire, the u.s. economy is divided among itself. a brand new cnn poll shows just 16% of americans approve of how they're handling their job.
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it begs the question, even when we see signs of a recovery taking hold, are we really just rome before the fall? and that is a question glen hubbard is uniquely qualified to answer. he's the former chairman of george bush's national advisers and currently at the grad school of business. he wrote a book called "balance." glen, do you see parallels? >> there are parallels. great powers stumble when their politics don't keep up with economics and they turn inward. in the book, a number of u.s. case studies. the u.s. can get out of this, but it involves fixing the policies you talked about. >> how do you fix it? >> there are two tracks. one, we have to have more political ideas rather than just having the republican and democratic parties having a monopoly on discourse. and we'll have to change the budget rules. those big budget numbers you talked about have to be fixed and currently our leadership isn't doing it.
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>> we have the biggest business in the world and we're operating without a real balance sheet. that's a problem. look, fed chairman ben bernanke, he gave some specifics for a framework of when stimulus could end. because let's be honest, monetary policy is something that's been very clear when fiscal policy has not. markets got spooked this week. did he do the right thing, do you think? >> we're expecting too much of the fed. the government needs to do its part and politicians really are not. i think the fed was trying to communicate a gradual exit. i didn't see it as that newsworthy, but it apparently spooked the markets. >> it really spooked the markets. do you think it's warranted, or is this pricing it all in for when the fed is going to have to come back? it's going to have to take its foot off the accelerator, as ben bernanke said. is this going to take it in and get over it? >> the fed has to reach an
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ending point, and i think people are worried about seeing the economy dislocated. >> 50% of all new wealth, entrepreneurship. here in the u.s. it's only 20%. do you fear this country falling behind when it comes to innovation and creativity, and how do we make sure it doesn't happen? >> that is the question for americans. we have led the world in our productivity and our technological prowess because of entrepreneurship, because of innovation. if we want that to continue, we have to continue to support basic research and provide a favorable client for entrepreneurs, not necessarily red tape and tax burdens. >> i think every university in america should have a mandatory class for entrepreneurship. because kids are coming out of college. they're not going to have the sort of pact of corporate america that my generation or my parents' generation had. >> i agree. even just thinking like an entrepreneur.
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if you're not ready to start a business, being able to grab it when the mood strikes you is what every business person should be able to do. the question is who is rising? many people think, glen, that answer is china. you say in your book concerns about china taking over the u.s. are overblown. >> i think so. i think the u.s. will remain on top. in the book, my co-author project an image of power going forward. we see the u.s. in the lead. china has real problems in its financial system and in its own political system. >> so we don't need to get that concerned about that at this point because you pointed out the parody of people purchasing is not the way it is here. it's a rapidly growing economy, but it's still far, far below the potential of the u.s., still. >> that's right, but it's not an excuse for complacency here. we've got to get better politics in washington. >> all right. better politics in washington. we'll hope from your lips to
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god's ears or at least politicians' ears. glen, nice to see you. coming up -- >> it's the largest drug distribution center in the country. and today -- i'm harborcides' newest tire. >> it's cnn's newest inside man, morgan spurlock, next. matt's brakes didn't sound right... i brought my car to mike at meineke...
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...and we inspected his brakes for free. -free is good. -free is very good. [ male announcer ] now get 50% off brake pads and shoes at meineke.
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one america, two economies. the divides are clear. education, wages, even obesity. the gap between how the rich and the rest live in this country is growing. morgan spurlock has made a career of diving into all facets of american life. you remember him for the famous mcdonald's diet from the documentary "supersize me." that was the first when we learned who morgan spurlock is, but now comes "inside man." i want to give you a sneak peek of his first episode which takes
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you to the business of medical marijuana. >> i'm locked in the back of a van somewhere in northern california being driven to an undisclosed location where they grow massive amounts of marijuana. there are some other stipulations that we have to follow now. we can't show you any of the people who work there, we can't show you the people's faces, we can't show hands or body parts. this isn't sketchy at all. >> look at all the drama. in a dark van with just a little lighter. the whole idea of medical marijuana does have us skeptical. what did you learn that you didn't know going on? >> i pictured a lot of guys with dreadlocks saying, dude, i got my card, i just want the good stuff. you imagine it's those types of people, and what i really discovered is there are people who have real, legitimate problems, people who are treating real, legitimate problems. whether it's a soldier coming back from afghanistan or iraq with ptsd or someone who has had massive amounts of barbiturates
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prescribed to them and are using this to get off those medications. it's remarkable. >> you went inside orange grove. you're picking oranges. >> i did. >> and tremendous minded me that one-third of all jobs right now make $20,000 a year or less. certainly picking oranges is one of those. it's really interesting to me that the demand and growth for jobs are the difficult ones and hard to do. >> one thing to say is immigrants are coming over and stealing these types of jobs. believe me, no one is racing out to get a migrant farmworker job where it's back-breaking labor, you're working 12 hours a day and you're making $100. if you're doing well, you make $100. the day i went, i filled three buckets and i would have made about $35 over the course of the entire day. >> so you're not a good orange picker? >> i am one of the world's worst orange pickers. >> there are those who say you get 12 million people who are
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out of work in this company, you get 7% unemployment, and 12 million people who have been completely sidelined by the economy, at some point they might have to take those jobs. >> they might have to take those jobs, and what if you gave those people the ability to work in this country, pay taxes, even if they only make $20,000 a year, which to them is a lot of money. >> you spent time in brooklyn and in finland. teachers in finland and teachers in this country, a very different career track. >> one of the things that happened with finland which is fascinating, when they started revamping education in the late '60s and early '70s was they wanted to eradicate poverty. there is no really low middle class. their education from
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kindergarten through college is absolutely free, paid for by the government. every teacher has a master's degree in education. >> but not everyone can be a teacher. you have to select it. >> it takes an incredible amount of participation. 100 people will apply and they'll pick about 10 who actually become teachers. >> all these threads is something that makes up "nation's economy." can't wait to see it. >> you're going to love the show. >> make sure you watch morgan spurlock right here on cnn at 10:00 p.m. on sunday, "inside man." do you know what the most important word on wall street means? >> the taper? >> yes. >> i don't know. >> what are the politics? >> what is the taper? >> i'll tell you what it is and why you're 401(k) is riding on it.
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so your 401(k) is probably
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worth less than it was the start of the week, sorry. investors got spooked and there is one word driving that fear. taper. taper. wall street's latest obsession. hollywood has "it" girls, wall street has "it" words. >> we have to stop with the bond buying and start to taper. >> taper is the latest "it" word. >> this is the top 10 list. >> reporter: it won't make letterman's top 10 list. >> what is a taper? >> reporter: it's not a zoo animal or a cnn anchor or a way to wear your jeans. it's fed chair ben bernanke's toughest job yet. how does he taper down from historical stimulus? it likely the greatest challenge for this chief. >> he's already stayed longer than he wanted or is supposed to. >> reporter: he's done what no
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fed chief has done before. basically he's holding a fire hose, spraying $85 billion a month straight into the economy. it can't go on forever. and the obsession on wall street as to when it will end is probably the most important driver of your 401(k) right now. taper joins a list that includes quantitative easing, fiscal cliff, sequester. remember t.a.r.p.? sometimes the jargon sounds greek to the rest of us. speaking of greece, austerity is the word there, opposite of b r bernanke's actions. the message from the fed, take away the training wheels too soon and the economy could crash. but fail to taper, and this economy may not take flight on its own. to be clear, the taper won't start yet and the fed will keep the fire hose on for now. bernanke did lay out a road map for slowing the stimulus. that will likely start when we
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see 7% unemployment. the unemployment rate currently stands at 7.6%. thank you for joining us on "your money." you can find me on facebook and twitter. my handle is @christineromans. welcome to "the next list." i'm dr. sanjay gupta. today we'll meet in novators using plastic, of all things. he is making medical devices out of toys. >>he

Your Money
CNN June 22, 2013 11:00am-11:31am PDT

News/Business. A break down the financial news of the week.

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